Math 1050 Credit Card Debt Project

Name: Hayden Hewitt

You have received your monthly credit card statement and must now deal with the financialrealities of last months birthday celebration. While your milestone in years was deserving of acelebration, dealing with the $2000 in credit card charges will require some planning.Your credit card statement lists the APR (Annual Percentage Rate) for your balance to be 14.5%.This is the yearly interest rate the credit card company uses in calculating interest due on yourbalance. The credit card company compounds interest monthly. Your monthly interest rate oncredit card charges will be:

APR

12

0.145 0.01208312

The minimum payment required by your credit card company is $25/month. Assuming that youdo not make any new charges to your account, answer the following questions to help youdetermine the best plan for paying off this credit card debt.1.To begin with, lets check out the plan of only paying the minimum amount due each month. Toget a feel for how this will affect the balance, finish filling in the following table using theminimum monthly payment of $25.Month123

Old Balance

Interest

Payment

New Balance

$2000.00$1999.17$1998.33

$24.17$24.16$24.15

$25.00$25.00$25.00

$1997.48

$24.14

$25.00

$1997.47

56789101112

$1997.47$1996.63$1995.76$1994.87$1993.97$1993.06$1992.14$1991.21

$25.00$25.00$25.00$25.00$25.00$25.00$25.00$25.00

$1996.63$1995.76$1994.87$1993.97$1993.06$1992.14$1991.21$1995.27

$24.13$24.12$24.11$24.10$24.09$24.08$24.07$24.06

$1999.17$1998.32$1997.48

What is the total amount that has been paid to the credit card company at the end of the firstyear?$300.00

How much of the original balance has been paid off at the end of the first year?$14.73

Math 1050 Credit Card Debt Project

Name: Hayden Hewitt

From looking at the new balances over the first year, how many years do you think it will take topay off the $2000?(This is a guess so there is no wrong answer. Before going on to step 2, write down your bestestimate.)About 25 years2.A formula for calculating the payment, P , required to pay off a debt of amount D in M monthswith monthly interest rate i is

DiM

11iUsing this formula, solve for M to determine the number of months it will take to pay off the$2000 credit card debt with minimum monthly payments of $25. Round the number of monthsto two decimal places. (Attach all work for this assignment to the end.)283.12 months

How long is this in years, rounded to the nearest tenth of a year?

23.6 yearsWhat is the total amount paid to the credit card company, rounded to the nearest dollar?$7098.54

3.How many months will be required to pay off the debt if you pay $50 each month? Round to twodecimal places.54.98 months

How long is this in years, rounded to the nearest tenth of a year?

4.58 yearsWhat is the total amount paid to the credit card company, rounded to the nearest dollar?$2748.70

Math 1050 Credit Card Debt Project

Name: Hayden Hewitt

4.How many months will be required to pay off the debt if you pay $75 each month? Round to twodecimal places.32.39 months

How long is this in years, rounded to the nearest tenth of a year?

2.7 yearsWhat is the total amount paid to the credit card company, rounded to the nearest dollar?$2428.165.How large would your monthly payment have to be in order to pay off your debt in 12 months?Round up to the next nearest cent.$166.70

What is the total amount paid to the credit card company, rounded to the nearest dollar?$2290.376.What is the best plan for paying off the $2000? Why?The last option because its the cheapest in the end.

What is the worst plan? Why?

The first option because you are paying an extra $4000 on top of what you originally owe

What should you do if you cannot afford to make the payments required by the best plan?Make a budget for a plan for you can afford that will pay off the debt without paying too muchinterest

Math 1050 Credit Card Debt Project

Name: Hayden Hewitt

7.What are two things that the average consumer can learn by completing this assignment? i.

How to budget their bills better so they can be out of debt quicker

ii.

Find a credit card with an APR that is less than 10% if they really want to save their money